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Promulgated Forms
Champion Real Estate School
| Question | Answer |
|---|---|
| Chapter 1: Valid contract | Meets all of the requirements of the law |
| Void contract | Invalid from the beginning and does not affect the parties cannot be enforced |
| Voidable contract | Cannot be enforced |
| Unenforceable contract | Cannot be enforced due to some flaw in the contract, passage of time or other issues |
| Elements of a valid and enforceable contract | • Competent parties • Offer and acceptance • Legal purpose • In writing (to comply w/ Statute of Frauds, conveyance of interest in real estate or lease for more than 1 yr • Consideration |
| Consideration | Exchange of promises Ernest money is not a requirement of a valid contract |
| Executory contract | Becomes effective date (signed and communicated) through the closing ( usually 45-60 days) |
| Amendments | • Changes to the closing date • Changes to the sales price, down payment and or amount financed • Repairs that the seller agrees to perform • Removal or waiver of contingencies |
| Option | Agreement between a buyer and seller or landlord or tenant, giving the buyer the right to purchase a property at a preset price for a given period of time for a "option" fee |
| Addendum to contract | Attachment that adds or further describes the rights and duties of the parties; An addendum always prevails over any contract provisions that are contradictory |
| Assignment of a contract | Transfers all rights related to the contract. Contracts for personal services are not assignable. (ie. Listing agreement or buyer's representation agreement |
| Novation | A new contract is substituted for an existing one |
| Reasons for termination | • Mutual agreement • Partial performance (lease buyout) • Substantial performance (most of the work completed/ offset for uncompleted work) • Impossibility (death/ war/ natural disaster ) • Operation of law ie. zoning • Breach of contract |
| Unilateral contract | Lacks mutuality, an option is a unilateral contract because only the seller has made a promise |
| Chapter 2: Broker - Lawyer Committee | Created to draft and revise contract forms capable of standardization for use by real estate License holders. |
| TREC has promulgated sales contract forms | 1.One-to-Four Family Contract (Resale) 2. New Home Contract (Incomplete Construction) 3. New Home Contract (Completed Construction) 4. Unimproved Property Contract 5. Residential Condominium Contract (Resale) 6. Farm and Ranch Contract |
| TREC can revoke or suspend a license | Upon proof that the license holder drew a deed, note, deed of trust, will or other written instrument that affects or transfer title to land |
| TREC has two promulgated lease forms: | 1. Buyer’s Temporary Residential Lease – for use when the buyer occupies the property for < 90 days prior to closing. 2. Seller’s Temporary Residential Lease - for use when the seller occupies the property for < 90 days after closing. |
| Right of first refusal | right of first refusal. This provision in a lease gives the tenant the right to purchase the leased property by matching or bettering any offer before the property will be sold tosomeone else. |
| An offer can be communicated by: | • phone • fax • e-mail • letter • hand delivery |
| Texas recognizes the legal doctrine of imputed notice. | Under this concept, an offer is presumed to have been delivered to the principal when it is delivered to the agent. |
| The party making the offer is called | the offeror |
| The party to whom the offer is made is | the offeree. |
| The person to whom an offer is made has several options when responding to the offer, which include: | • Do nothing • Reject • Accept • Counteroffer (rejection coupled with a new offer) |
| Agents should take care that they make no representations as to acceptance of an offer until | all parties have signed, and the acceptance has been communicated |
| The process of offer/counteroffer will continue until | an agreement is made or one of the parties grows weary and withdraws. |
| Communication is also referred to as | notification |
| An offer becomes a binding contract | when all parties sign it, and the acceptance is communicated to the offering party |
| Chapter 3: The contract form is the One to Four Family Residential Contract (Resale). | One to four means that it can be used for single-family properties, duplexes, triplex properties, and four-unit buildings 5 family properties are considered commercial properties ** not for use for condominiums |
| PARAGRAPH 3A. | The down payment is always the difference between the sales price and the The down payment is always the difference between the sales price and the sum of all financing |
| PARAGRAPH 3.C. | The Sales Price is the sum of 3.A and 3.B. |
| The most common form of mortgage financing is through third-party lenders such as: | banks, mortgage companies, and other lending institutions |
| Third party financing is divided into two broad categories: | • government loans are insured (FHA or VA or USDA) • and conventional loans (any loan that is not a gov't loan) |
| VA Guaranteed Financing: | Appraisal ordered by the VA - Certificate of Reasonable Value |
| APPROVAL OF FINANCING | This paragraph gives the buyer a specific number of days in which to obtain credit approval. (assets, income, credit history) |
| A loan assumption | Occurs when a buyer assumes and agrees to pay the seller’s existing mortgage (the original borrower is not necessarily released from on-going liability for repayment |
| Some concerns regarding assumptions: | 1. Seller’s liability 2. Time to process (75-90 days) |
| If the seller does not receive a release of liability, the buyer assuming the loan | “joins the original borrower” on the note, leaving both with liability for repayment of the loan. |
| Seller Financing Addendum | Available for buyers who cannot qualify for traditional financing. |
| Buyer Default | Liquidated damages (ernest money) |
| The most common mistakes that license holders commit in preparing contracts fall into two areas: | • Inserting terms into a contract when a TREC-promulgated form is available • Adding terms to a contract that are not addressed by a TREC-promulgated form |
| Exceptions to use of TREC promulgated forms | • form prepared and approved by a license TX atty • form prepared by the property owner • form prepared by atty and required by property owner |
| Paragraph 11, Special Provisions, that changed the legal effect of the contract. Inserting “time is of the essence” in Paragraph 11 changes the legal effect of the contract and could be interpreted as | the unlawful practice of law by the license holder. |
| The counteroffer is actually a two-step process: | • the rejection of the original offer coupled with a new offer |
| Multiple offers | No offer has a priority of presentation over another. The broker should submit all offers promptly. |
| Paragraph 1: Parties | Buyer and Sellar |
| Paragraph 2-D: Exclusions | The following improvements and accessories will be retained by Seller and must be removed prior to delivery of possession. (Give item a name and location) |
| Paragraph 2 C: Accessories | Describes accessories not necessary built in but conveyed to the buyer |
| THIRD PARTY FINANCING ADDENDUM - 2B- Buyer approval | lender's requirements related to Buyer’s assets, income and credit history |
| Chapter 4: Earnest money and Termination Option | DELIVERY OF EARNEST MONEY AND OPTION FEE: Within 3 days after the Effective Date, Buyer must deliver to escrow agent |
| Termination option | negotiable number of days after effective date of contract, by 5pm |
| Paragraph 5: Earnest Money | is a deposit paid upfront to show serious intent w/in 3 days by midnight |
| For a valid option to exist, the following are required: | the blanks in 5A and 5B (negotiable) must be filled out option fee must be paid w/in 3 days of the effective date of contract by 5pm. Buyer must deliver option fee to escrow agent (option is credited but never refunded) |
| Paragraph 6A - The owner's tile policy can be paid by: | either the Buyer or the Seller |
| The title policy contains ______ exceptions promulgated by the TX Dept of Insurance | 9 |
| Paragraph 6B - Commitment | The title company has 20 days from the date that they receive the contract to furnish a commitment to the buyer for title insurance |
| Buyer has _______________ days to object afterthe Buyer receives the Commitment, Exception Documents, and the survey. | negotiable |
| Paragraph 6D- Objections | Buyer may object to any matters that might prohibit certain use of activity of the property (installation of satellite dish, running a business out of the home, or parking RV on street) |
| Residential Real Property Affidavit | When using the seller's existing survey, the seller is given a number of days to deliver the survey, T-47 Affidavit to the Buyer and title company. |
| TREC Notice to Prospective Buyer | TRELA requirement that license holders advise buyers to have the abstract examined by an atty or obtain title insurance |
| Paragraph 7A - Property Condition - Access, Inspection and Utilities | Buyer may have the Property inspected by inspectors selected by Buyer and licensed by TREC or otherwise permitted by law to make inspections |
| Paragraph 7A (2) - Seller's Disclosure Notice | •Buyer doesn't t receive Notice - may terminate at any time prior to the closing and the earnest money refunded • Seller delivers the Notice - Buyer may terminate for any reason w/in 7 days after Buyer receives the Notice or prior to the closing |
| Paragraph 7C -Seller's Disclosure of Lead Based Paint | construction prior to 1978 C - Buyer's Rights (buyer may waive right to inspect) D - Buyer's Acknowledge of receipt of copy |
| Paragraph 7D(2) - ACCEPTANCE OF PROPERTY CONDITION | buyer accepts property as is provided that the seller complete specific repairs |
| Paragraph 7-G Environmental Matters | Buyer is advised about the presence of environmental hazards |
| Paragraph 8 -A Brokers and Sales Agent | business where broker or sales agent owns 10% |
| Appropriate TREC document RSC-3 | Disclosure of Relationship Service Company |
| Paragraph 12 | Buyer and Seller Expenses |
| Paragraph 20 | taxes sent to IRS for foreign seller |
| Good funds | wire transfer, cashier's check |
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